VAT Exemptions on the Purchase of New Adapted Motor Vehicles

03 January 2016

VAT Exemptions for New Adapted Vehicles:

1. HMRC legislation allows for vehicles to be supplied at the ‘0% of VAT’ to disabled people who “normally use a wheelchair or a stretcher and who need an adapted motor vehicle to enable them to travel safely”.

• To clarify the somewhat ambiguous language used in this legislation: For the purposes of this VAT relief, a wheelchair user is any disabled person who normally uses a wheelchair (electrically powered or otherwise) in order to be mobile (The use of a Mobility Scooter does not qualify the user as a wheelchair user).
• This VAT relief also includes disabled wheelchair users who are not reliant on a wheelchair all of the time but who can be considered as ‘normally’ using a wheelchair.

Examples:

• People with degenerative conditions, such as Multiple Sclerosis or Muscular Dystrophy who use a wheelchair as and when their condition dictates.
• Lower limb amputees who use a wheelchair for daily respite from wearing/using prosthetics etc.
• People who suffer with ambulatory disabilities like chronic fatigue syndrome, severe arthritis or Cystic Fibrosis, who may be dependent on a wheelchair on a regular basis.

1. The vehicle must be permanently adapted, and the adaptations must be completed before the vehicle is supplied to the customer and both vehicle and adaptations must be supplied on the same invoice to qualify for the VAT exemption.

• This VAT exemption rule will not apply to the vehicle if it is purchased separately and then subsequently adapted.
• Clarification: If adaptations to suit a disability are made to a vehicle after the point of purchase, it is only those adaptations, not the vehicle, that qualify to be 0%-rated for VAT.

1. The VAT1615A form (Customer declaration for zero-rated VAT supply of an adapted motor vehicle*) must be signed by the person claiming the exemption and this information must be made available to HMRC upon demand.

• Clarification: The person claiming the exemption must complete and sign their section of the VAT1615A declaration then pass it on to the vehicle supplier.  The supplier must then complete and sign their section of the declaration and file it in their accounts, so it can be produced for the HMRC on demand.

* Click this link to download a copy of the ‘VAT1615A Customer declaration for zero-rated VAT supply of an adapted motor vehicle’ form.  https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/605061/VAT1615A.pdf

1. These rules apply to Motorcycles, Scooters, Trikes, Motorcycle/Sidecar Combinations, Cars, Vans, Motorhomes etc. Basically, any motor vehicle that has seating for anything up to 12 people, including the driver.

 

Qualifying Use:

1. To qualify for zero rating the adapted vehicle must be for the domestic or personal use of the disabled wheelchair user.

• Clarification: This means normal everyday use by the disabled wheelchair user, such as going to the shops, taking the children to school, hospital visits, travelling to and from work, enjoying the sunshine as you cruise around the countryside, travelling to and from motorcycle events, or simply revelling in the ‘Joie de vivre’ that comes from thundering down the road feeling fabulous, whatever the weather.  It also includes ‘incidental’ use at work, providing the main use remains as a private vehicle.

1. Suppliers cannot zero rate vehicles supplied to businesses regardless of who uses them or how they have been adapted. For example, an adapted vehicle that will be used as a taxi or intended for immediate resale at a profit.

 

VAT Exemption for Adapted Vehicles.  The 3-Year Rule:

1. HMRC legislation limits the number of vehicles that can be purchased at the Zero Rate of VAT to one vehicle in any 3-year period.
2. Therefore, any additional vehicle purchased by an individual within this three-year period will be subject to VAT at the applicable rate (currently 20%).

• The 3-year rule applies to the vehicle, it does not apply to vehicle adaptations.

 

Exceptions to the 3-year Rule:

• There could be occasions when there are reasons why a disabled person needs to replace an adapted motor vehicle within a 3-year period and the normal rules can be waived. These are when the:

• vehicle has been stolen.
• vehicle has been destroyed or damaged beyond repair in circumstances beyond the control of the disabled person.

• disabled wheelchair user’s condition changes and because of this the vehicle is no longer suitable for use by that person.

1. In order for an exception to the 3-year rule to be made, you will need to provide additional evidence to:

• the supplier of your vehicle – if your previous vehicle has been stolen or destroyed or damaged beyond repair you will need to provide information from insurers, police or details from the garage writing-off the vehicle.

• HMRC – if your condition has changed significantly and your adapted vehicle is no longer suitable to meet the needs of your condition; you will need to contact the HMRC helpline. HMRC will then consider the case and send you a letter confirming whether or not the 3-year exception is met. The supplier will not be able to zero rate their supply to you without this confirmation letter.

 

VAT Relief on the Repair and Maintenance of Adapted Vehicles: (Including Servicing)

1. The repair or maintenance of an adapted motor vehicle can be zero-rated when the work relates to a vehicle (or an adaptation to a vehicle) that was eligible for zero rating when it was bought or supplied.
2. If you take the vehicle for repair or maintenance to a third-party garage you will need to produce the original purchase invoice for the vehicle or adaptation to confirm that it had previously been supplied at the zero rate.

• Suppliers that did not supply the vehicle will need to check the original invoice for the purchase of the vehicle to confirm that it was supplied at the zero rate. You should keep a copy for your records.

 

You do not have to be a wheelchair user to qualify for VAT exemption on any adaptations that are necessitated by your disabilities.

 

VAT Exemptions for Adaptations:

• If any disabled person irrespective of being a wheelchair user or not, needs a motor vehicle to be adapted to meet the needs of their condition, the adaptations (parts and labour) can be 0%-rated for VAT. This requires the signing of an ‘Eligibility Declaration by a Disabled Person’ form.
• Clarification: You do not have to be a wheelchair user to claim a VAT exemption on adaptations that are necessitated by your disabilities.  The person claiming the exemption must complete and sign their section of the ‘Eligibility Declaration by a Disabled Person’ then pass it on to the adaptation engineer/supplier.  The engineer/supplier must then complete and sign their section of the declaration and file it in their accounts, so it can be produced for the HMRC on demand.
• The ‘Eligibility Declaration by a Disabled Person’ form can be used to claim VAT exemption on adaptations to any type of goods or property where those adaptations are specifically necessitated by disability.
• Clarification: This declaration form can be used for adaptations to the home, garage, clothing, motorcycle boots, motorcycle clothing, workshop equipment etc. where those adaptations are necessitated by disabilities.

 

1. VAT exemptions are applicable subject to individual circumstances.

*  Click this link to download a copy of the ‘Eligibility Declaration by a Disabled Person’ form:  https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/419380/Eligibility_Declaration_Disabled_-_March_2015__2_.pdf

 

VAT Relief on Second-hand Adapted Vehicles:

• A second-hand adapted vehicle can be 0%-rated for VAT, if the qualifying conditions are met. Although second-hand cars are usually sold on the Second-hand Margin Scheme, this is an optional scheme, not a mandatory one, and an eligible vehicle can be sold outside that scheme and normal VAT practice followed.

1. The Margin Scheme on second-hand cars and other vehicles (VAT Notice 718/1)has more information about the Second-hand Margin Scheme.

 

VAT Relief on Equipment that is “designed solely for use by a disabled person”:

• This means the original intention of the designer was to produce equipment or an appliance designed solely to meet the needs of persons with one or more disabilities.
• You can zero rate the supply to an eligible customer of any equipment and appliances that have been designed solely for use by disabled people.
• Equipment which has been designed solely for use by disabled people will stay eligible for relief even if it’s available to be bought by people who do not have a disability, although you can only zero rate supplies which are made to eligible customers.
• There are a number of motorcycle adaptations that automatically qualify for 0%-Rated VAT due to being designed solely for the use of a disabled person. These include:
• The Kliktronic Gear Changer: https://www.kliktronic.co.uk
• The K-Lever2 Twin Lever unit: https://www.kliktronic.co.uk/the-k-lever2-clutch-brake-system/
• The PFM Twin Lever unit: https://www.pfmbrakes.com/universal-twin-mastercylinder
• Buyer Beware: I know of at least one online site offering these types of equipment to disabled motorcyclists, where all prices include VAT.  Our advice is, don’t buy anything from them.  Buy direct from the manufacturers and you can’t go wrong.

 

Penalties for Misuse of the VAT Relief System:

1. Penalties will apply to any person who gives an incorrect eligibility declaration to the supplier of a vehicle.

• HMRC may raise a tax assessment, if a supplier contravenes the 3-year rule or fails to keep and submit the required eligibility declarations.
• Abuse of this VAT relief is not acceptable. This includes people purchasing numerous adapted vehicles within the 3-year period, removing the adaptations and then selling the vehicle on for a profit.
• In severe cases of abuse, where fraudulent intent can be established, an individual may be prosecuted in a criminal court.

 

No VAT Refunds from HMRC:

1. There is no facility for HMRC to refund VAT to you if it has been charged incorrectly.
2. If you’re entitled to buy VAT-free goods, and you offer the ‘Eligibility Declaration by a Disabled Person’ form, your supplier should not charge you VAT.

• If your supplier refuses to accept your ‘Eligibility Declaration by a Disabled Person’ form and allow the VAT relief, go to a different supplier, because you cannot claim the VAT back from HMRC once you have paid it.
• If you have been charged VAT on adaptations or equipment that should have been 0%-Rated for VAT, you should claim the refund of the VAT from the supplier, using the ‘Eligibility Declaration by a Disabled Person’ which they can then use to readjust their next VAT return.

 

For more information on VAT relief for disabled people see:  https://www.gov.uk/guidance/reliefs-from-vat-for-disabled-and-older-people-notice-7017

 

NABD Support:

If you need help convincing a supplier of the legitimacy of the VAT exemption declarations, or getting a refund of VAT you were charged incorrectly, contact the NABD office via office@thenabd.org.uk and we will advocate on your behalf.

If you require copies of these forms and you do not have access to email or printing facilities you can request them by writing to: NABD, Unit 20, The Bridgewater Centre, Robson Avenue, Manchester, M41 7TE.  (Please enclose an A5 self-addressed envelope with a first-class stamp on it).

1. These support services are for NABD Members. You can find out just how cheap and easy it is to become a member of this marvellous biker family by going here: https://nabd.org.uk/join/

Rick Hulse
NABD Chairman